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America Needs the WTO

In addition to all else President Trump has been doing lately to
sow chaos in the international trading system, he is reportedly
considering pulling the U.S. out of the World Trade Organization.
Bent on preserving slim Republican congressional majorities in
November’s elections, the president may hope that a loud
goodbye to the WTO would reassure and revitalize his protectionist
political base.

Any WTO member can withdraw with six months’ notice. Mr.
Trump may attempt to withdraw the U.S. unilaterally, as he did with
the Paris climate accords—although courts might find that
such a move requires congressional approval. Mr. Trump could also
propose legislation, like the type that has been leaked to the
press, expanding his existing discretionary authority to ignore WTO
treaty obligations. Whether Congress would pass such legislation is
another matter.

But let’s say Mr. Trump managed to get his way and pull
the U.S. out of the WTO. The consequences for the world and U.S.
economies would be immense. Among them: diminished trade growth,
costly market and supply-chain disruptions, and the destruction of
jobs and profits, especially in import- and export-dependent U.S.
industries. The resulting trade barriers would compel some American
companies either to downsize or move offshore. The global economic
spiral set in motion by Mr. Trump’s reckless trade actions on
steel, aluminum, Canada, Mexico, China, and Europe would
accelerate.

Trump’s assault on the
organization could harm U.S. workers even more than his tariffs
have.

If his trade brinkmanship so far is any indication, the
president seems willing to risk these dire results. But he may not
be aware that losing the benefits of membership in the WTO would
harm American businesses and workers even more than his recent
trade actions are harming them.

WTO membership provides goods and services produced in the U.S.
with protection against discrimination in foreign markets.
Nondiscrimination rules are the heart of the WTO trading system,
which currently applies in 164 countries and to 98% of all global
commerce. Should Mr. Trump cancel America’s membership, every
WTO member would be free under international law to discriminate
against American goods and services however they wished unless they
had a free-trade agreement with the U.S.

Moreover, all WTO members are required to grant one another
lower tariffs at WTO-agreed rates. Should the U.S. pull out,
American exporters would have to pay significantly higher tariffs
almost everywhere in the world. These higher tariffs would
boomerang back through global supply chains to diminish the
competitiveness of U.S. producers by increasing their end
prices.

Because tariffs are taxes, Mr. Trump is already imposing a
hidden tax increase in the form of higher prices on American
businesses and workers by provoking trade partners into retaliating
against his unilateral and illegal tariffs on steel and aluminum
with their own unilateral and illegal tariffs. If the U.S. left the
WTO, this disguised tax increase would be vastly higher. Whatever
boost the average American might have received from the tax cuts
enacted last year would vanish as prices soared.

By abandoning the WTO, the U.S. would also lose access to its
dispute-resolution process, thereby abandoning its only recourse
under international law for countering unfair trade practices. This
even though the most recent Economic Report of the President tells
us that “the United States has won 85.7 percent of the cases
it has initiated before the WTO since 1995.” That report is
signed by President Trump. Nevertheless, he relentlessly disparages
the WTO as rigged against the U.S.

Rather than relying on the international rule of law, the
president is attempting to bully other countries into accepting his
terms through tariffs and intimidation. Mr. Trump’s trade
bullying isn’t worthy of our country. Moreover, it
won’t work. When the U.S. represented nearly half of global
production in the wake of World War II, it had the power to bend
other countries to its will because they sorely needed U.S.
investment and goods. Today the world economy is shaped much
differently. The U.S. represents less than a quarter of the world
economy, and trade relationships are more fluid and diverse. Mr.
Trump and his boosters are vastly overestimating America’s
global economic leverage.

Pushing other countries around either won’t work at all or
it won’t work for long. Some of our trading partners have
started to push back against Mr. Trump’s lawless tariffs.
Others will surely follow. If Mr. Trump compounds his protectionist
crusade by abandoning the WTO, Americans will soon remember why we
created the rule-based trading system in the first place.

Instead of waging war on the WTO, the U.S. should help modernize
it by making it more effective in addressing digital trade,
services, subsidies, sustainability and intellectual property.
Internationally agreed rules for international trade—and a
process for resolving disputes about those rules—are an
indispensable pillar of national prosperity. This is true for all
countries, but especially a trading country the size of the
U.S.

James
Bacchus, a professor at the University of Central Florida,
served as chief judge for the World Trade Organization and a U.S.
representative from Florida. His new book, “The Willing World:
Shaping and Sharing a Sustainable Global Prosperity,” will be
published this month by Cambridge University Press.